BTIG Overviews Restaurant Sector's Top 2020 Trends, Stock Picks

The dine-in restaurant industry as a whole will likely experience a year of decline in 2020 given notable distractions including the Olympics and the U.S. presidential election.

Industry Trends

During an election cycle, consumers tend to stay at home more often -- as was the case in 2016, BTIG analyst Peter Saleh wrote in a note. If this trend plays out again in 2020, it could benefit restaurants who offer take-out and delivery options. The same theory also holds true for the Olympics which will take place this summer.

In addition, it will become more expensive for restaurant operators to advertise during the Olympics and throughout the presidential election cycle, the analyst wrote. This should result in the majority of restaurant operators showing flat to negative target rating points (TRPs). The metric is a measure of how likely audiences will make a purchase.

Double Down On Pizza

Pizza delivery chains are likely to benefit from consumers opting to spend more time on their couches to watch the Olympics or tune in to the latest presidential election updates. In fact, the 13- to 16-hour time difference from the summer Olympics in Japan will likely help boost late-night pizza delivery orders from national chains who deliver late into the evenings.

Papa John's Int'l, Inc. PZZA is in the early stages of a turnaround and has a new team to help spur growth in 2020, the analyst wrote. A change in leadership includes CEO Rob Lynch, Chairman Jeff Smith, and a strong brand ambassador in Shaquille O'Neal.

Related Link: Restaurant Business Dishes Out What To Look Out For In 2020

Drivers of same-store sales growth for Papa John's include menu innovation and marketing spend. Both of these initiatives are the two main drivers needed to spur a restaurant turnaround.

Meanwhile, Domino's Pizza, Inc. DPZ remains well-positioned to gain market share globally, invest in its own business to generate new capabilities, and consistently return cash to investors, the analyst wrote.

"We still view Domino's as a secular market share gainer owing to its digital capabilities, national value platform and continued unit growth," Saleh wrote.

Chipotle Still Turning Around

Chipotle Mexican Grill, Inc. CMG should show another year of improving unit economics along with shareholder returns, Saleh also wrote. Ongoing menu innovation remains a "considerable driver" and the company has further support from digital, loyalty, delivery, and improved real estate selection.

Ratings And Price Targets

• Saleh maintains a Buy rating on Papa John's with a price target lifted from $67 to $75
• Saleh maintains a Buy rating on Domino's Pizza with an unchanged $325 price target.
• Saleh maintains a Buy rating on Chipotle's with a price target lifted from $890 to $1,0101. The analyst also names Chipotle as a "top pick" for 2020.

Benzinga's Take

Ordering pizza during the Olympics makes sense but how much of an incremental benefit will late-night delivery bring to the chains? Also, hosting pizza parties during a presidential debate doesn't quite seem like a major catalyst.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.